Project Development, which comprises Housing Development and Property Development, creates sustainable and vibrant urban environments with both residential and commercial property. The business area is responsible for the Group’s property acquisitions and divestitures as well as project development which generates contract work for the other business areas. Project Development works through wholly owned projects or in collaboration with other partners in joint ventures.

Peab is one of the largest housing developers in Sweden and has a strong position on the market. Operations are spread throughout the country in 19 offices divided into six regions. In Finland Peab is represented in Helsinki and seven other large regional cities. In Norway operations are located in the Oslo area, Tromsø and Ålesund.

Property Development develops new offices, premises and sometimes whole city districts in collaboration with municipalities and other partners. The business is represented in Stockholm, Gothenburg, Malmö, Helsinki, Oslo and Tromsø.

NET SALES AND PROFIT

In business area Project Development net sales for 2018 were SEK 7,844 million (8,343). Operating profit amounted to SEK 785 million (804).

At the end of the year capital employed amounted to SEK 12,984 million (9,986). The increase is due to investments in project and development properties, higher activities in our own developed housing projects in Norway and Finland as well as investments in operations and investment properties in Property Development.

Capital employed

MSEK

31 Dec 2018

31 Dec 2017

Mkr

31 dec 2018

31 dec 2017

Operations property

Driftsfastigheter

915

1,036

Investment property

Förvaltningsfastigheter

589

871

Project and development property

Projekt- och exploateringsfastigheter

9,685

7,612

of which housing development rights

varav bostadsbyggrätter

5,394

5,116

of which commercial development rights

varav kommersiella byggrätter

656

627

of which on going housing projects

varav pågående bostadsprojekt

2,034

1,173

of which on going commercial projects

varav pågående kommersiella projekt

1,227

383

of which completed projects

varav färdigställda fastigheter

14

170

of which other

varav övrigt

360

143

Participation in joint ventures

Andelar i joint ventures

1,019

912

Loans to joint ventures

Utlåning till joint ventures

1,466

1,383

Working capital and other

Rörelsekapital och övrigt

-690

-1,828

Total

Summa

12,984

9,986

Net sales

Per geographic market, 2018

Description

Sweden, 76% (84)

76

Norway, 6% (5)

6

Finland, 18% (11)

18

Housing Development

Peab’s position on the Swedish market is good. Being spread all over the country creates a local organization that builds close customer relationships and effectively meets the demand for new production of homes in varying price classes. Our range of housing forms is broad; tenant-owned apartments, condominiums and apartments for rent as well as homeowner or tenant-owned single homes.

The housing market changed during 2018. The year began with a decline in the market trend and ended with continued uncertainty about how the housing market will develop in the next few years. This led to fewer start-ups of new projects with the greatest decline in the Stockholm region. The market is not homogeneous and has been affected to various degrees, depending on the location, by a large supply of new homes, many of which are in the same price bracket. Banks’ higher requirements for loans and the latest government amortization requirements have also had a negative effect on the market.

Peab strives to be a forerunner in sustainable urban development and build attractive and sustainable projects that meet economic, environmental and social goals. Peab considers social sustainability essential which includes creating vibrant and safe neighborhoods with meeting places. All our new, own developed apartment buildings are certified according to the ecolabel Swan with Bra Miljöval (Good Environmental Choice) labelled electricity.

The development rights portfolio for Swedish operations is spread over the country. Several major housing projects in Sweden are urban development projects where collaboration between a number of partners is an important success factor. In Lindholm’s historical shipyard in Gothenburg, Peab is working closely with businesses and the City of Gothenburg to develop an attractive urban environment with a clear environmental profile. Peab is developing and constructing around 200 homes in two tenant-owned housing blocks lining the Göta River. Last autumn Peab completed our first Swan ecolabeled apartment building, Lindholmskajen with 67 apartments. During the year construction began in the Innovatum area in Trollhättan where Peab is developing the venerable industrial site into 69 top modern apartments in Turbinen ready for occupation in 2020. Peab continues to develop homes in the new city district Öster Mälarstrand in Västerås. In September we began construction of 70 new apartments in three different buildings, the highest of which is eight stories, in Sirenen.

The Norwegian housing market contracted in 2018. Housing prices rose steadily during the first half of the year and then fell somewhat in the autumn which is normal. There are significant differences in housing prices from one geographic area to another. Prices rose during the year in Oslo and Tromsø while prices in, for example, Bergen and Trondheim fell.

Peab is still a relatively small player on the Norwegian housing market but we are steadily growing. Peab’s largest own developed housing project, Carl Berner Torg in Oslo, started up in the spring of 2018. The project consists of 111 apartments and is expected to be completed in the second quarter of 2020. In Tromsø the first stage of the Skir project with 180 homes is under construction and expected to be completed in the spring of 2021. A number of projects were completed in 2018, among them Himmel & Hav (Sea & Sky) in Tromsø with 87 homes and Prestegårdsgate and Flötningen B4 in Skien with 20 respectively 27 homes.

The housing market has grown dramatically the past few years in Finland, a fact noticeable in the rising number of production start-ups at Peab. In 2018 we intensified investments in housing production in Helsinki. In the Jätkäsaari docklands housing project GoldenEye with 81 apartments is under construction and the first construction stage of housing project Goldfinger with 109 apartments was initiated in September. Both are expected to be completed in 2020. The first stage of Kruunuvuori Shoreline with 91 apartments was completed in 2018 and the second stage comprising 140 apartments is under construction.

Outside Helsinki there are a number of housing projects geographically well spread all over Finland. In growing Seinäjoki in Western Finland Peab is working on a regional project, developing and building a new block, Itikanmäki. It is seven apartment buildings with 6-8 floors containing a total of 294 apartments, with the final building completed in March 2019. Peab has previously built three apartment buildings, Bostads AB Klemettilänpuisto IV, in the historical Milka dairy district Klemettilä in Vasa. Construction of the final apartment building began in 2018 and it will be completed in 2019.

Housing development rights

Number, approx.

31 Dec 2018

31 Dec 2017

31 Dec 2016

Antal, cirka

31 dec 2018

31 dec 2017

31 dec 2016

Development rights on our own balance sheet

Byggrätter i egen balansräkning

21,300

20,700

17,300

Development rights via joint ventures

Byggrätter via joint ventures

5,000

4,800

3,900

Development rights via options etc.

Byggrätter via optioner m.m.

9,100

7,100

7,200

Total

Totalt

35,400

32,600

28,400

Own housing development construction

2018

2017

2016

2018

2017

2016

Number of housing starts during the year

Antal under året produktionsstartade bostäder

2,213

3,048

2,651

Number of sold homes during the year

Antal under året sålda bostäder

1,825

2,734

2,044

Total number of homes under construction, at year-end

Totalt antal bostäder i produktion vid årets slut

6,231

6,333

4,381

Share of sold homes under construction, at year-end

Andel sålda bostäder i produktion vid årets slut

63%

72%

69%

Number of repurchased homes on the balance sheet, at year-end

Återköpta bostäder i egen balansräkning vid årets slut

104

33

50

Net sales and operating profit

Net sales decreased by three percent and amounted to SEK 7,106 million (7,330). Operating profit amounted to SEK 615 million (706) and the operating margin was 8.7 percent (9.6).

The number of start-ups of our own developed homes during the year amounted to 2,213 units (3,048) with a good geographic spread in Sweden as well as in Norway and Finland. The number of sold homes during 2018 was 1,825 (2,734). The number of own developed homes in production at the end of the year was 6,231 (6,333). The level of sold homes in production was 63 percent compared to 72 percent at year-end 2017. The number of repurchased homes per 31 December 2018 was 104 (33) and was spread over the three countries.

At the end of the year capital employed has increased in Housing Development due to higher investments in project and development property and greater activity in our own housing developments in Norway and Finland, which remain on the balance sheet until completion.

The diagram shows when in time the housing projects in Norway and Finland are expected to be completed. The total number of ongoing own housing developments in Norway and Finland were 1,446 per 31 December 2018.

When in time ongoing homes in Norway and Finland will be completed

Total

Q1 – 19

76

Q2 – 19

251

Q3 – 19

230

Q4 – 19

260

Q1 – 20

326

Q2 – 20

55

Q3 – 20

111

Q2 – 21

137

A new city district is emerging in Borås – Regementsstaden. Majoren with 57 apartments, the first of four stages, went on sale in April 2018. It is expected to be completed in 2020. More than 1,000 homes are planned for the area in a characteristic regiment style.

Housing project GoldenEye in Helsinki offers homebuyers facilities that contribute to an active life, for example, a gym, car sharing, kayaks and offices for teleworkers. The planned 81 homes are expected to be ready in 2020.

Himmel & Hav in Tromsö with 87 homes was completed in 2018. The housing project is part of a larger development project in the area that contains 291 homes in total and 1,500 m2 commercial space.

In the same area as Himmel & Hav in Tromsø Peab is building the project Skir, commercial space and 180 condominiums. Construction is in two stages, and the first 80 condominiums will be ready for occupancy in the first quarter 2021. The whole project will be completed in the fourth quarter of 2021.

Property Development

Property Development has broad, extensive expertise in refining and developing locations and land for offices, malls, hotels, industries and sports facilities. It is primarily geared to run development projects based on development rights on our own balance sheet. Collaboration with partners via joint ventures may occur at different times during a project. In 2018 the market for office buildings in Swedish big city regions was strong and so was the transaction market. The market for office rentals is expected to continue to develop positively and real estate prices are expected to have a stable development.

During the year several major property projects were started up in Sweden. During the first quarter Peab decided to gather all our offices in the Oresund region to a new Peab Center in Hyllie, Malmö and invest around SEK 200 million. The new office building is the first of a total five buildings in the project The Gate. The first stage comprises two buildings containing a total of 10,200 m2 in office space. In May Peab signed a rental agreement with the wellness chain Actic that will move its headquarters and open a gym in a new building in Ulriksdal, Solna. They will occupy around 2,600 m2, of which 1,150 m2 will be offices and the gym will take up the rest on two floors. Peab is investing around SEK 280 million in the eleven story building. The top three floors are the offices and gym and the other eight floors are a multistory car park with 475 parking spaces. The building is expected to be ready the summer of 2020.

Growth in the Finnish economy contributed to an active real estate market during the year. The office market in Finland is expected to be positive in 2019 as well. During the year no new projects were started in Finland but renting out and planning for the third stage of Ultimes Business Garden, in Sockenbacka Business Park in Helsinki is underway. The seven story office building has around 7,900 m2 rentable office space and 150 parking spaces. Occupation is planned for March 2019 and a total of six office buildings with around 50,000 m2 office space are planned for the area.

There is still an optimistic perspective on the office market in Norway, primarily as a result of rising rent levels in central Oslo. The positive market development creates opportunities for Peab’s operations in Oslo and Tromsø. Several large projects were started up in Norway in 2018, among them Peab’s own developed project, Carl Berner Torg in Oslo. The project consists of 3,500 m2 commercial space, all of it rented out to Coop. The project is expected to be completed in the second quarter of 2020. The first stage of the Skir project in Tromsø with 1,500 m2 commercial space was launched in December. The project is expected to be ready in the spring of 2021. Nadderuveien 1 in Bekkestua outside Oslo, a joint venture where Peab has a 50 percent participation, started up at the end of the year. The project consists of 67 homes and about 3,500 m2 commercial space, all of it rented out to Norgesgruppen. The entire project is expected to be completed in 2021.

Net sales and operating profit

During 2018 net sales were SEK 738 million (1,013) and operating profit was SEK 170 million (98). The increase in operating profit is primarily due to improved profit from wholly owned and partially owned companies. Profit from partly owned companies was SEK 101 million (72) during the year. In the first quarter last year assets in Arenastaden were divested to Fabege, which affected net sales by SEK 577 million but had no effect on operating profit. Last year also included a capital gains effect of SEK 75 million attributable to the divestiture of joint venture companies to Catena.

In cases where no divestiture is planned properties can remain in the Group for a considerable length of time in order to garner rent and appreciation revenue or a combination of both. Included in the capital employed in Property Development are operations property for a reported value of SEK 915 million (1,036) and investment property at SEK 589 million (871). In 2018 Peab divested Ångkraftverket 2 in Västerås which is rented by Steam Hotel and Kokpunkten Actionbad. Centur, owned equally by Peab and Balder, purchased the property. The hotel and water park was developed by Peab. The transaction had no material effect on operating profit but it reduced capital employed by around SEK 800 million.

All major property projects are presented in the tables below.

The first office building of five in the project The Gate, Peab’s new offices in Hyllie, Malmö, will be completed in 2020. The area has an excellent communications location being close to the city, countryside and public transportation.

In Ulriksdal in Solna Peab is constructing an entirely new city district. Attractive and vibrant urban environments with homes and commercial premises are under development here. In the summer of 2020 the wellness chain Actic’s headquarters and gym will move into a building characterized by innovative architecture.

In August 2017 construction began on the second office building, Ultimes Business Garden II, in Sockenbacka Business Park in Helsinki. It is a seven story office building with around 7,600 m2 rentable office space and 150 parking spaces. Occupation is planned for the beginning of 2019 and a total of six office buildings are planned for the area that will contain around 50,000 m2 office space all together.

Property projects

Completed projects

Location

Area in m2

Degree rented, %

Recognized value, MSEK

Färdigställda projekt

Ort

Uthyrningsbar yta, m2

Uthyrningsgrad, %

Bokfört värde, Mkr

Businesspark

Ängelholm

Företagspark

Ängelholm

60,800

90

241

Businesspark

Ljungbyhed

Företagspark

Ljungbyhed

76,100

61

91

Offices

Helsinki

Kontor

Helsingfors

9,300

100

276

Tenancy

Malmö

Hyresrätt

Malmö

4,600

100

142

Offices

Sigtuna

Kontor

Sigtuna

3,600

78

66

Other completed projects

Övriga färdigställda projekt

24

Total

Summa

840

of which operations property

varav driftsfastigheter

541

of which investment property

varav förvaltningsfastigheter

299

Ongoing projects

Location

Area in m2

Degree rented, %

Recognized value, MSEK

Total investment at completion, MSEK

Timepoint of completion

Level of completion, %

Pågående projekt

Ort

Uthyrningsbar yta, m2

Uthyrningsgrad, %

Bokfört värde, Mkr

Beslutad investering, Mkr

Tidpunkt färdigställande

Färdigställande-grad, %

Offices

Solna

Kontor

Solna

12,400

100

287

453

Q4-2019

53

Offices

Malmö

Kontor

Malmö

4,900

68

87

185

Q1-2020

33

Offices

Helsingborg

Kontor

Helsingborg

4,500

100

35

117

Q1-2020

30

Offices and parking

Helsinki

Kontor och parkering

Helsingfors

7,600

27

240

342

Q1-2019

56

Other ongoing projects

Övriga pågående projekt

15

Total

Summa

664

of which operations property

varav driftsfastigheter

374

of which investment property

varav förvaltningsfastigheter

290

Significant joint ventures

Peab’s significant joint venture companies Fastighets AB Centur, Tornet Bostadsproduktion AB, Fastighets AB ML4 and Point Hyllie Holding AB are developing well and via them Peab has built up considerable indirect holdings in investment property and development property for both commercial and residential purposes. Ongoing returns are in the form of shares in the profit from joint ventures recognized in operating profit and interest income on lending. Changes in market values of property that effect reported values in joint venture companies are not recognized in Peab’s profit.

Fastighets AB ML4

Own and manage the research facility Max IV. The facility is rented to Lund University.Peab’s share: 50 percentPartner: WihlborgsGeography: Lund

Point Hyllie Holding AB

Develop, own and manage the office property The Point as well as own and manage the hotel property Värdshuset 5 (Operator Quality Hotel View).Peab’s share: 50 procentPartner: VolitoGeography: Hyllie, MalmöMajor ongoing projects: 29 floor office building, The Point, Rentable area 20,000 m2

Key ratios 2018 significant joint ventures 1)

MSEK

Fastighets AB Centur

Tornet Bostadsproduktion AB

Fastighets AB ML4

Point Hyllie Holding AB

Mkr

Fastighets AB Centur

Tornet Bostadsproduktion AB

Fastighets AB ML4

Point Hyllie Holding AB

Net sales

Nettoomsättning

286

130

87

30

Profit for the year

Årets resultat

234

107

14

1

Total assets

Balansomslutning

6,861

3,485

1,997

1,042

– of which recognized value of properties

– varav bokfört värde fastigheter

6,085

3,428

1,849

1,008

Peab’s portion of unrecognized fair value exclusive tax

Peabs del av oredovisade verkliga värden exklusive skatt

353

212

1) Refers to the recognized value of joint venture companies for January – December 2018 and per 31 December 2018. Since Fastighets AB Centur and Tornet Bostadsproduktion AB apply the market value of properties, the values in the table above differ from the values presented in the Peab Group for joint venture companies in note 19.

Peab AB is a public company, Company ID 556061-4330. Domicile Båstad, Sweden.

All values are expressed in Swedish krona. Krona is abbreviated to SEK, thousands of krona to TSEK and millions of krona to MSEK. Numbers presented in parentheses refer to 2016 unless otherwise specified.

Data regarding markets and the competition are Peab’s own assessments, unless another source is specified. These assessments are based on the best and latest available facts from, among others, previously published material.

- Peab takes work environment matters very seriously and works systematically to create safe workplaces. The kind of safety equipment used varies depending on national regulations and the type of operations. A risk analysis is always performed for each workplace before any exception is made.

- The people pictured in this publication are wearing personal safety equipment required by regulations valid for the operations and country they are in.